Chap10gnposting - Chapter 11: Standard Costs and Operating...

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Chapter 11: Standard Costs and Operating Performance Measures 1 Chapter 11: Standard Costs and Operating Performance Measures What are standards? Quantity expected to be used given a specific planned or actual production level Amount (DM & DL) expected Costs expected to be incurred to be used at what cost Why or when would we want to use standards? To assist in the budgeting process Direct materials budget Direct labor budget VOH budget Evaluation purposes Management by exception given that mgt. has limited time Ideal versus practical standards Ideal Perfection versus Practical Reality Whether a variance is acceptable or not depends upon what type of standard is used. One would accept slight variances with ideal standards but less tolerant of variances with practical standards. Contrast each type of standard and what it will do for the firm? What is the purpose of a standard? Ideal motivational value; Practical evaluation/estimation goals
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Chapter 11: Standard Costs and Operating Performance Measures
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Chap10gnposting - Chapter 11: Standard Costs and Operating...

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